When you have a client who wants to sell their business, they face unknown factors that can impact the value they receive on the sale. Having a trusted partner on their side can help alleviate stress and provide a streamlined approach to guide a business owner through the process.   

Mariner Capital Advisors recently assisted the owner of a building products distribution company through the sales process. The outcome was successful: Because part of the purchase price was paid in the form of equity in the combined companies, our client will have an opportunity to benefit financially from additional upside created by the companies’ combined growth. 

Client Need 

Mariner Capital Advisors (“MCA”) was introduced to the owner of a building products distribution company (the “Company”) through a Mariner wealth advisor. 

The owner, who had acquired ownership in the Company in the early 2000s and helped expand the business into new geographic markets and product lines, bought out the founder in the mid-2010s and added a third location with the help of a silent partner. 

The Company, which provided siding, gutter, and window and door products to residential remodelers and home builders, grew significantly from 2020 to 2022. Demand for its products rose during the pandemic while some of its competitors had struggled to meet customer needs due to supply chain challenges, allowing the Company to gain market share in the region.  

Coming off several strong years of performance, the owner decided it would be an ideal time to sell the business and engaged MCA to advise him through the sale process. 

Solution 

MCA compiled a list of acquisitive building products distributors with similar and complementary product lines serving similar end markets. Additionally, MCA researched active private equity firms with either investments in the building products distribution space or general interest in distribution companies. MCA also prepared a confidential information memorandum detailing every aspect of the Company’s operations and financial performance as well as additional material used to help solicit interest from the companies and private equity firms it had identified as potential buyers. 

In early 2023, MCA contacted and discussed the acquisition opportunity with most of the top building products distributors in the industry. Due to record M&A activity in the industry during the previous two years, many of the most active acquirers were taking a break from making new acquisitions and were focused instead on integration. However, MCA identified one private equity-owned building products distributor in particular (the “Buyer”) that seemed like an ideal fit. 

The Results 

The Buyer and the Company each offered a similar but different mix of complementary product lines.  Furthermore, the Buyer primarily served the new home construction market but did not have a strong residential remodeling presence. The Buyer therefore saw a valuable opportunity to extend new product lines to both businesses’ existing customers as well as to diversify its customer base. Lastly, the Company’s geographic footprint spanned several states adjacent to the Buyer’s existing territory. By acquiring the Company, the Buyer could become one of the largest building products distributors in the central Midwest. 

The Buyer submitted an initial offer for the Company in late spring 2023. MCA had received informal offers from several other companies and private equity firms, but the Buyer’s offer was the strongest due to the synergies it stood to gain from the transaction. The Buyer’s initial offer proposed a purchase price comprised of cash and a substantial earnout based on the Company’s future performance. After an extended negotiation period, the Buyer agreed to adjust its initial offer and replace the earnout component with guaranteed equity in the combined companies. 

Throughout the remainder of 2023, the Company continued its impressive growth trajectory, which was helpful in maintaining momentum and a strong negotiating position throughout the due diligence and closing process. The transaction was closed in early 2024. 

The owner of the Company will remain actively involved in the business for the next several years as the Company and the Buyer work together to capture synergies and integrate operations. Because part of the purchase price was paid in the form of equity in the combined companies, our client will have an opportunity to benefit financially from additional upside created by the companies’ combined growth. 

If you have a client who needs assistance with selling their business, contact your relationship manager. 

This material is intended for informational and educational purposes only. No representations or warranties, either express or implied, are made regarding the accuracy or completeness of the information contained herein. Reliance upon information in this material is at the reader’s sole discretion.

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